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Uber's a disruptive tech player, not a mere taxi service

Shweta Rao | Nov. 17, 2014
Here's how Uber--a taxi company that came into India just a year ago--is successfully challenging local market leaders to lower their prices through astute tech play.

That's because platforms don't try to own one side of the transaction, the way traditional taxi companies do by employing drivers, says Johnson. Instead, Uber simply connects both sides using technology.

Quick Scaling- Uber doesn't need to scale by adding resources such as physical infrastructure (stores, factories, etc.) or additional inventory, the way traditional businesses do. Instead, it grows through its highly scalable number of drivers which is driven by network effects between its users and drivers.

Logarithmic Growth - So while a traditional taxi company's costs continue to rise as it grows (because it needs to buy more vehicles and employ more drivers), Uber's costs start to level off logarithmically when it reaches scale in any city. This ability to grow through ecosystems rather than resources allows it to scale to an extent that traditional businesses can't.

Surge Pricing and Tax Laws

Not all is rosy. The tech taxi provider is in the line of fire for many other reasons. Industry watchers would recall Uber and Lyft really go to war in the US over drivers. Whoever gets more drivers will be able to meet more demand, and ultimately make more money, was the rule.

The need to balance supply and demand is also the main reason behind Uber's controversial 'surge pricing'. That's how a platform like Uber easily controls its business. When Uber raises the price with surge pricing, it does so because there are more requests coming in than there are drivers to take them. "Uber is willing to raise the price to consumers and price some of them out of the market if it will get more drivers on the road," says Johnson

Of course, another challenge is regulation. This challenge isn't unique to Uber or other ride-sharing platforms. This legal trouble happens because platforms are a new, disruptive way of doing business in today's world, but the laws are still oriented around the old ways of doing business.

As a result, these platforms often operate in a legal grey area. The usual strategy to counter this challenge is to get big really fast and then to try to use its popularity to legitimize itself. This only underlines how important expansion is to Uber. It needs to continue to grow in order to be able to have the popular support to convince local or national politicians to work with Uber and not against it.

"The option that Uber is most likely to choose in India is partnering with a company that provides payment gateways or digital wallets. This way, Uber will still be able to accept online payments, and users will be able to pay in rupees through their cell phones, using the cash they have stored on their digital wallets," says Jordan Perch, transportation analyst at "Uber will have to integrate a digital wallet into their application and the two-step authentication requirement can also be met, since Uber will no longer use an international payment gateway."


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